December 11, 2012

Mapera Rural Bank

123 Sta. Barbara
Malasiqui, Pangasinan
Philippines
Re: Possible lawsuit between A and Mapera Rural Bank
To Mapera Rural Bank:
In response to your request to our law firm, here is our legal opinion about a possible
lawsuit with you and your client. Our opinion was based on the facts gathered from you
which are as follows:
A, a public servant from the Civil Service Commission and an employee of Bangko
Sentral ng Pilipinas (BSP), was assigned to examine Mapera Rural Bank (MRB)
located in Malasiqui, Pangasinan. During the period of examination, A applied for a Car
Loan with MRB in the amount of One Million Eight Hundred Thousand Pesos
(P1,800,000.00) payable in two years. A purchased a Ford Expedition 2012 Model in
Ford UN Ave., Manila. However, A failed to pay the installments and refused to pay
MRB despite repeated written and verbal demands. Aside from the Chattel Mortgage
over the subject vehicle, A also executed a Promissory Note in favor of MRB.
Now, you wanted know about what course(s) of action or remedy, if any, can you take
against A. In our opinion, the first issue here is As civil liability to pay the loan and to pay
for damages. Secondarily, another issue that can be raised is whether A can be held
administratively liable for his acts. Anent the first issue, A, indeed, can be civilly liable to
pay his loan and to pay damages because of his failure to fulfill his obligation by not
paying the installments due on the promissory note and refusing to pay despite the
demands. About the second issue, A can also be held administratively liable for
borrowing money from your bank while being an employee of Bangko Sentral which has
supervision over your bank.
On one hand, as to the nature of As civil liability to pay the loan, the applicable law
provision is Article 1953 of the Civil Code which states that:
Art. 1953. A person who receives a loan of money or any other fungible thing acquires the
ownership thereof, and is bound to pay to the creditor an equal amount of the same kind
and quality.1

Based on the facts you provided, you were not paid by A for the loan he contracted.
You, as the creditor, may go to the courts to seek remedy for the debtors failure to fulfill
his obligation. Because of As refusal to pay his indebtedness to you, you may compel
him to pay the same by filing an action for collection of sum of money before the courts.
1 An Act to Ordain and Institute the Civil Code of the Philippines (Civil Code),
Republic Act No. 386, Art. 1953 (1949).
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However, you also have to take note that the car bought with the loaned money was
mortgaged. A mortgage is a real right constituted primarily to secure an obligation upon
property to satisfy with the proceeds of the sale of such property when the same
becomes due and has not been paid or fulfilled. Art. 2087 of the Civil Code states that:
Art. 2087. It is also of the essence of these contracts that when the principal obligation
becomes due, the things in which the pledge or mortgage consists may be alienated for
the payment to the creditor.2

The mortgage on the property of A serves as a security for the payment of loan and in
a way protects you from breach of the obligation. It is our opinion that a foreclosure
proceeding is a better remedy to get back the loaned money because A may not have
sufficient funds to cover the obligation. In foreclosing and alienating the car, there are
higher chances that you can recover the loaned money.
In addition, you may recover damages from A for his intentional refusal to pay his
obligations pursuant to Article 1170 of the same code which states that:
Art. 1170. Those who in the performance of their obligations are guilty of fraud,
negligence, or delay, and those who in any manner contravene the tenor thereof, are
liable for damages.3

On the other hand, the administrative liability of A is governed by the Sections 16 and
27(d) of the New Central Bank Act which states:
Section 16. Responsibility. - Members of the Monetary Board, officials, examiners, and
employees of the Bangko Sentral who willfully violate this Act or who are guilty of
negligence, abuses or acts of malfeasance or misfeasance or fail to exercise
extraordinary diligence in the performance of his duties shall be held liable for any loss or
injury suffered by the Bangko Sentral or other banking institutions as a result of such
violation, negligence, abuse, malfeasance, misfeasance or failure to exercise
extraordinary diligence.4
xxx

xxx

xxx

Section 27. Prohibitions. - In addition to the prohibitions found in Republic Act Nos. 3019
and 6713, personnel of the Bangko Sentral are hereby prohibited from:
xxx

xxx

xxx

(d) borrowing from any institution subject to supervision or examination by the Bangko
Sentral shall be prohibited unless said borrowings are adequately secured, fully disclosed
to the Monetary Board, and shall be subject to such further rules and regulations as the
Monetary Board may prescribe: Provided, however, That personnel of the supervising

2 Id. Art. 2087.

3 Id. Art. 1170.
4 The New Central Bank Act, R.A. 7653, Sec. 16 (1993).
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and examining departments are prohibited from borrowing from a bank under their
supervision or examination.5

Furthermore, Rule 5, Section 52 of The Revised Uniform Rules on Administrative Cases

in the Civil Service states that:
Section 52. Classification of Offenses - The following are grave offenses with their
corresponding penalties:
Contracting loans or money or other property from persons with whom the office of the
employee has business relations.
1st Offense Dismissal. 6

A is an employee of Bangko Sentral when he borrowed money from MRB which is

subject to the supervision and examination by the said institution thereby violating the
prohibition set forth by the New Central Bank Act. It is also known that A is a public
servant in the Civil Service and thus, he shall also be liable under the attributable
offense set forth by the Revised Uniform Rules on Administrative Cases in the Civil
Service. With those said, you may also file an administrative complaint against A.
In conclusion, we again reiterate that A can be held liable civilly and administratively
under our laws. We recommend that if ever you are going to pursue a lawsuit, take
advantage of the mortgage on the car. An action for collection of sum of money is more
applicable when an obligation is not secured by a mortgage. 7 With a mortgage, it is
more probable that you will recover the money.
Our opinion is based on laws applicable to your situation. If you decide to take this
matter to the courts, we are confident that you have a strong case in your favor.

Sincerely Yours,
Legal Counsel

5 Id. Sec. 27 d.
6 The Revised Uniform Rules on Administrative Cases in the Civil Service, Rule 5, Sec . 52.
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